Buying a business brings excitement and new opportunities. But it can come with hidden challenges.
Some business owners discover employee misclassification or wage disputes made by the previous owner only after the sale. These mistakes can lead to significant financial penalties and legal complications.
Who is responsible for past classification errors?
Successor liability affects your business’s financial future. When you purchase a business, you acquire not just its assets. You get its legal problems, too.
Under federal and Florida law, courts generally hold new owners accountable for previous owners’ employee misclassification and the wage issues it causes. This includes:
- Unpaid minimum wages
- Unpaid overtime pay
- Missing benefits
Your responsibility is clearer if you still have the same employees working for you or have the same employee structure.
Time limits for wage claims in Florida
Even with successor liability, workers need to file their claims within specific time periods to seek compensation. Knowing these deadlines helps you assess your risk exposure. In turn, this helps you plan your response to past classification mistakes.
Employees can file wage claims under two statutes:
- Fair Labor Standards Act (FLSA): Wrongly classified workers have two years to file claims for unpaid wages. If the violations were on purpose, the deadline extends to three years.
- Florida Minimum Wage Act: This gives employees four years for standard claims and five years for intentional violations.
Note that the deadlines start from the last date of the violations.
Start your new business on the right foot
It’s crucial to conduct thorough research before any business purchase. Request detailed employment records from the previous owner and check all worker classifications carefully.
Consider working with a qualified legal professional to review potential risks and address issues you find. If something slips through your audit, a business litigation attorney may help you defend yourself or mediate between you and the employees.
We help businesses facing wage disputes and potential litigation. Contact us for a consultation.